So much fuss has been made of the political issues raging around Turkey in recent years that it is easy to forget its financial markets. The question of Turkish membership of the EU has received more column inches throughout Europe and Turkey than many other issues put together. More recently, the question of how far Turkey’s secular traditions should be respected has been equally explosive. Interest in the situation extends far and wide, Turkey being the country the US holds up as an example of

The apparent resilience of volumes disguises a market that has changed dramatically in tone from a year previously. Most dramatically, with the weight of supply pushing down on capital constrained bank balance sheets, pricing has in many cases doubled. Moreover, when paying a higher price, Russian borrowers can no longer rely on a liquid market which meant last year that even the largest request for financing was filled with ease. Despite these difficulties our panel at IFR’s first Russia and CI

Benjamin Binetter - BNP Paribas Benjamin Binetter is head of loan syndications & trading for Russia and the CIS for energy & commodity structured finance. He joined BNP Paribas in 2005 and has overseen the bank’s development in Russia and the CIS, where his responsibility has included the origination and execution of major syndication mandates for the likes of Norilsk Nickel, Mechel, Rusal, Rosneft, System Capital Management and Metinvest. Christian Eberl - UniCredit Market and Investmen

As the credit crisis stopped activity in the leveraged loan market, Turkey has seen a steady deal flow throughout 2008. That the corporate market has in part driven this flow shows how the Turkish market has changed over the past few years. The syndicated loan product is long established in Turkey but activity was long dominated by financial institutions and trade finance business. However, yields have fallen in the FI sector to the extent that clubs have replaced syndication and as a result sev

The Istanbul Exchange originated as one of the most prominent associations of bankers, and was established in 1866 by the Sultan of the Turkish Empire. The present Istanbul Exchange (ISE), which was re-establihed in 1986 as a modern and electronic exchange, has achieved phonomenal growth in those 22 years, in which time more than 300 Turkish companies have raised over US$37bn. For blue chips wishing to list on ISE there must be evidence of at least three years’ operations, with the last two year

Turkey has the legal and regulatory framework in place for a range of derivatives contracts to be offered, although currently the country does not enjoy a broad range of derivatives offerings when compared to Greece, the other big economy in the South East Europe (SEE) region. The use of OTC derivatives is relatively common among banks and corporates in Turkey, but demand is also less than in Greece – though significantly bigger, and with much greater potential, than in other countries in the re

Turkey’s 2001 banking crisis was a useful education for its financial institutions and regulator. Some claim the experience undermined its appetite for the structures blamed for those problems – and those are at the heart of the credit problems today. “Particularly after what happened in 2001, I think the market perceives a high level of regulation as a good thing,” said Caroline von Nathusius, an associate at Linklaters. She praised the Banking Regulation and Supervision Agency (BRSA) for havin

Some had convinced themselves that the credit crunch, triggered by the sub-prime crisis in the US, would bypass Turkey. Alas, that has not proved to be the case and by the start of 2008 the pain had spread to its shores. In fact, the economy was already showing signs of slowing at the end of 2006. But the illusion that emerging markets were decoupled and immune to the sub-prime flu held until credit taps dried up early this year. Turkey has now been badly affected, which – combined with the poli

Turkey’s current account deficit stands at US$40bn, roughly 6% of GDP, and the country has to find a way of raising money to redress this balance. Nigel Rendell, senior emerging markets strategist at RBC Capital Markets estimated Turkey needs to raise between US$20bn-$25bn from the international capital markets this year. Foreign direct investment (FDI) has rocketed over the last five years due to government reforms, and has become a substantial means of fund raising in Turkey, but there is conc

Sitting between Europe on one side and the Middle East on the other, Turkey in some ways has its feet in both camps, and in other ways in neither. It has expended much energy in recent years bringing its economy closer to that of Europe. And yet it is to the East where many expect to see the best performing economies of the future. As geopolitical tensions mount, Turkey increasingly finds itself situated on an important international fault-line, which adds importance – as well as risk – to its p

Turkey’s Justice and Development (AKP) party is not short of admirers. And unlike in the first years of its ascension to government, many of them are inhabitants of the country’s financial community. The AKP has won admiration by upholding Central Bank independence and running a tight fiscal budget. Under AKP guidance, Turkey has made some important strides with its economy, for which the party rightly takes credit. Public sector debt, for instance, stands at 50% GDP, which is below the Maastric

Global credit crunch aside, Turkey should be an ECM hot spot with a government eager to privatise former state enterprises and widespread familiarity with equity issuance as a means to raise capital. However, a much touted run of deals has not yet materialised and two transactions have already been cancelled this year. Most ECM bankers involved in the country retain high hopes, meanwhile, citing robust macroeconomic prospects over the short and medium term. Annual GDP growth is tipped to exceed

When experts talk about the expansion of Islamic finance in Turkey, they often pinpoint Malaysia as the example Turkey should follow. Malaysia has a vibrant and active Islamic banking and financial sector, where both local and international players are active, and the efforts the government has taken through the years to create the right kind of infrastructure and regulatory environment have resulted in Islamic finance becoming the most popular funding vehicle for Malaysian corporates. Turkey ce

The fact that we are seeing banks manage their country limits and take a portfolio approach rather than a deal-based approach a lot more today is also linked to the fact that they have become more sophisticated in the application of the risk return models. The application of Basel II requirements also means that it is easier to find a balance on a secured transaction than it is on a cheaply priced most often not unsecured deal, and it is easier to allocate a new portfolio. IFR: Is there any poss

Hasan Mustafa: There were a couple of pre-export finance deals that were done at the end of 2007, which saw retail investors come back, but I think what Christian is saying is that retail is blocked up essentially for these bridge facilities. Even though they have higher pricing and higher yield, they just do not see why they need to take a six-month, nine-month, 12-month view. There are opportunistic buyers who will take it, but you cannot go on and invite 40 or 50 retail investors and hope tha

Hasan Mustafa, RBS/ABN AMRO: When you talk about the volume and the supply side increasing dramatically over the last three or four months, one needs to keep in mind the fact that the bulk of that is on the short term. So these are bridges to acquisitions, they are bridges to bond issues or IPOs, which essentially means that if you divide the market between term and bridge financing then the bridges will outweigh the term side of the business. This has two implications. Firstly because these bri

SMEs have been causing something of a stir in Turkey as banks increasing come to view them as a new source of revenue. According to research published by the European Commission, Turkish SMEs tend to be small by European standards, with annual turnover of less than €10m, illustrating their need for capital and their potential for growth. They represent an underleveraged and underbanked sector in Turkey. Credit only became available to them relatively recently, when the tax regime imposed on SMEs

Turkey’s phase of mass privatisations has been driving the loans market and drawing foreign investors into the country, as FDI declines. Turkish privatisations are relatively small scale compared to deals elsewhere in Europe. But the deal flow is showing impressive resilience in the face of drying up credit lines. “The stock market has taken a knock recently and the lira is currently cheap, but many would regard this as a buying opportunity for the mid or long-term investor,” said Carline von Na